My post several weeks ago on reinvention spurred a number of interesting offline conversations. The first of which was learning that Waste Management is undertaking a similar portfolio strategy to BMW in figuring out what their long-term sustainable business model is. Their blog discusses some of these businesses if you’re interested in reading more.
But the reason for revisiting the topic is that I told an incomplete story. The portfolio strategy I described works well for established businesses that are well-capitalized and have long-term time horizons. What about small and mid-sized businesses that live and die by their ability to generate current positive cash flow?
Thankfully, many of the concepts I discussed in my original post can be applied to these businesses, but in a slightly different manner. What I described in that post was what I call “parallel” reinvention. That is, you continue to focus on your core business while exploring how you can deliver your value proposition in new ways, ultimately integrating successful and scalable models into your core business to make the shift.
For small businesses, reinvention is a “sequential” process. That is, work like hell on testing new business models that fit your value proposition and quickly iterate through models until you land on one that’s sticky. This is also popularly known in startup circles as the “pivot”.
Mid-sized businesses can combine these strategis into a hybrid approach by continuing to focus on their core business while rapidly iterating on a single alternate model.
Here’s what these strategies look like conceptually:
This looks scary – and it is – but the businesses that can do this successfully, regardless of their size, share two common traits:
- A fierce dedication to learning from both success and failure. Without this midset, businesses are condemned to repeat their failures rather than moving into scaling their successful model.
- A strategic approach to reinvention. Develop hypotheses and test them against the real world. Integrate what you learn into your next hypothesis-testing cycle, and have the wisdom to know when you’ve found a model that is “sticky” and scalable.
No matter how you cut it, and no matter the size of your organization, reinvention is hard. But by being intentional about the process and learning from it, businesses of any size and in any industry can successfully shift their models in the face of changing environments.